Tucson Mortgages Home Loan News 9-8-2020

By Todd Abelson NMLS #180858 on .

Week of August 31st, 2020 in Review

The labor sector dominated headlines last week, as several important reports were released. First in on Wednesday was the ADP Employment report, which measures private sector payrolls. August brought a gain of 428,000 jobs, less than half of the 900,000 expected. However, July’s figure was revised higher.

On Friday, the highly-anticipated Jobs Report from the Bureau of Labor Statistics (BLS) showed that 1.4 million jobs were created in August, which was in line with expectations. The unemployment rate also improved, but there is more to that story due to the misclassification error, as explained below.

Meanwhile, another 881,000 people filed for unemployment benefits for the first time during the week ending August 29. This was 130,000 fewer than the previous week, while the number of Continuing Claims, measuring people who continue to receive benefits, also fell by 1.2 million to 13.3 million. While these latest numbers are an improvement, they still represent a staggering number of people. They also do not account for Pandemic Unemployment Assistance Claims, which greatly add to the unemployment figures overall.

Lastly, over in the housing sector, home prices continued to appreciate in July per CoreLogic’s Home Price Index report. But perhaps the biggest headline is the change in their forecast for appreciation for the coming year. Read on for more about this.

 

August Jobs Report a Step in the Right Direction

The Bureau of Labor Statistics reported that there were 1.4 million new jobs created in August, which was in line with expectations. There are two reports within the Jobs Report, and there is a fundamental difference between them. The Business Survey is where the headline job number comes from and it’s based predominately on modeling.

The Household Survey, where the Unemployment Rate comes from, is done by actual phone calls to 60,000 homes. The Household Survey also has a job loss or creation component, meaning it may be more reflective of actual job numbers, and the Household Survey showed that there were 3.76 million job gains in August (as compared to the 1.4 million job gains in the Business Survey).

The Unemployment Rate decreased from 10.2% to 8.4%, which was much stronger than expectations of 9.9%. While the Household Survey showed there were 3.8 million job gains, the labor force increased by 1 million people, which is a good thing and means more people are being counted among it. Because there were so many more job creations than the increase in the labor force, the unemployment rate improved significantly.

It is important to note, however, that there has been a misclassification error where people were classified as absent from work for other reasons and not marked as unemployed on temporary layoff when they should have been. Without this error, the unemployment rate would have been 0.7% higher or 9.1%.

Looking deeper into the numbers, 238,000 of the job gains in the headline job number were temporary 2020 Census workers. Without those jobs, the unemployment rate would be 1.5% higher at 9.9%. Adding in the misclassification error, it would be 10.6%.

The all in U6 Unemployment Rate, which includes total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, decreased from 16.5% to 14.2%.

Average hourly earnings increased 4.7% year over year, down slightly from 4.8%, while average weekly earnings, which we focus on more, rose by 5.3%, down from 5.4%.

All in all, this report is a positive step in the right direction for the labor sector, but we still have a long way to go to return to pre-pandemic levels.

 

Private Payrolls Show Slow Recovery

The ADP Employment Report showed that there was a gain of 428,000 new jobs in the private sector in August. While this is positive news at face value, it was less than half of the 900,000 new jobs expected. July’s report was revised higher by 45,000 new jobs, from 167,000 to 212,000.

Leisure and hospitality led with 129,000 new jobs while education and health services contributed 100,000 and professional and business services grew by 66,000. Construction also added 28,000 and manufacturing was up 9,000 new jobs.

Overall, small businesses (1-49 employees) added 52,000 jobs, midsized businesses (50-499 employees) added 79,000 and large businesses (500 or more employees) added 298,000.

After losing 19.7 million jobs in March and April we’ve gotten back a total of about 8.5 million. Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, said, “The August job postings demonstrate a slow recovery. Job gains are minimal, and businesses across all sizes and sectors have yet to come close to their pre-COVID employment levels.”

 

Digging Deeper into Jobless Claims Figures

The latest jobless claims report showed that another 881,000 people filed for unemployment benefits for the first time during the week ending August 29. This was 130,000 fewer than the previous week with California (+236K), New York (+63K) and Texas (+57K) reporting the largest gains. The number of Continuing Claims, measuring people who continue to receive benefits, also improved by 1.2 million to 13.3 million.

While these latest numbers are an improvement, they still represent a staggering number of people and there is more than meets the eye.

There are Pandemic Unemployment Assistance (PUA) Claims that are not captured

in the headline figures. People can apply for this when regular unemployment benefits expire. They’re also for people who usually would not be approved for unemployment benefits, like gig workers and contractors. These Initial PUA Claims totaled 759,000 in the latest week while Continuing PUA Claims increased by 2.6 million to 13.6 million.

Given that it’s September, people could be falling off regular benefits and applying for PUA benefits, and if that’s the case it means we are not really seeing an improvement in unemployment. All in all, the total number of people receiving some type of benefits is around 28 million, which would bring the real-time estimate of the unemployment rate to around 18%.

 

Home Prices Continue to Appreciate

Research firm CoreLogic released their Home Price Index report for July, showing that home prices increased 1.2% during the month and 5.5% when compared to July of last year.

But perhaps the biggest headline is in their forecasts, where they have said home prices will rise 0.1% in August and 0.6% in the year going forward. This is a big revision to their annual forecast from two months ago, where they estimated a 6.6% drop in the year going forward, which they revised to a 1% drop last month.

While a 0.6% gain is a big change, it is possible appreciation could be even stronger. The housing market has been hot and homes have been appreciating at a very solid level, mainly due to strong demand and tight supply.

Builders are going to have a tough time keeping up with demand because in the beginning of the Covid-19 crisis, they slowed production in anticipation of a slow housing market. When the housing sector outperformed expectations, there was much more demand than supply, causing lumber prices to spike.

What’s more, even though inflation is currently low, when the economy does come back full swing, demand for housing will return much faster than supply. This can cause a sharp rise in inflation and is something we have to monitor, especially since the Fed has mentioned they would allow inflation to run hotter for periods of time.

 

Family Hack of the Week

The start of the school year is the perfect time for an extra special treat. And this easy recipe for Chocolate Ganache is sure to please kids and adults alike.

First, chop up some hazelnuts or your favorite nut and set these aside. Then pour 1 cup of heavy cream into a saucepan and heat gently over medium. Place 8 ounces of bittersweet chocolate into a bowl. When the cream has started to form bubbles around the edge of the saucepan (hot but not simmering or boiling), pour it over the chocolate and whisk until you have a smooth consistency and the cream and chocolate are incorporated.

Spoon generous lashings over your ice cream of choice, sprinkle on the nuts and enjoy.

What to Look for This Week

After the market closures on Monday in honor of the Labor Day holiday, the economic calendar is relatively quiet. On Tuesday we’ll get an update on how small businesses are feeling with the NFIB Small Business Optimism Index while Thursday brings the latest news on weekly and continuing Jobless Claims. Inflation will also make headlines, with the wholesale-measuring Producer Price Index for August releasing on Thursday, followed by the Consumer Price Index on Friday.

 

Technical Picture

The Fed continues to stabilize the markets with its ongoing purchases of Mortgage Backed Securities. Mortgage Bonds have fallen below support at their 25-day Moving Average. They are currently in a range between the 25-day Moving Average, which has now become a ceiling of resistance, and support at the 50-day Moving Average.

 

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 8-31-2020

By Todd Abelson NMLS #180858 on .

Week of August 24th, 2020 in Review

Initial Jobless Claims remained in the millions for the second straight week, as another 1 million people filed for unemployment benefits for the first time during the week ending August 22. This was a decline of 98,000 new claims from the previous week. The number of people continuing to receive benefits also declined by 223,000 to 14.5 million. Though these declines are a move in the right direction, unemployment levels are still staggeringly high.

Home sales continue to be a bright spot, as both New and Pending Home Sales came in stronger than expected in July. Sales of new homes were up 14% from June to July and a whopping 36% higher when compared to July of last year, the Commerce Department reported. Pending Home Sales, which represents signed contracts on existing homes, increased by 5.9% from June to July.

Meanwhile, home prices also continue to appreciate. The Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed a 4.3% annual gain in home prices in June nationwide. This was unchanged from the annual gain reported for May. The Federal Housing Finance Agency (FHFA) House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts, also revealed that home prices were up in June.

The preliminary or second look at second quarter GDP came in at -31.7%. Though this was a slight improvement from the first look of -32.9%, it is still extremely weak and reflective of the economic shutdowns during the initial height of the pandemic. Economists do expect a big bounce back in GDP for the third quarter. Relatedly, Durable Goods Orders (which are orders for items that last three years or more) were better than expected in July, which factors into third quarter GDP estimates.

The Fed’s favorite inflation measure, Personal Consumption Expenditures (PCE), was also released last week, showing that headline inflation increased 0.3% from June to July and 1% year over year. Core PCE, which strips out volatile food and energy prices, also increased 0.3% from June to July and 1.3% compared to July of last year. Personal Income and Personal Spending were also better than expected in July.

Lastly, speaking of the Fed, they made headlines with an important announcement on inflation. Find out what they said, and why it’s significant, below.

 

Initial Jobless Claims Remain at 1 Million

Another 1 million people filed for unemployment benefits for the first time during the week ending August 22, which was 98,000 fewer claims than the previous week. Continuing claims, representing people who continue to receive benefits, also improved by 223,000 to 14.5 million.

Pandemic Unemployment Assistance (PUA) Claims filed by people like gig workers and contractors who are not typically approved for unemployment benefits totaled 608,000 in the latest week. Continuing PUA Claims improved by 252,000 to 11 million. These figures are in addition to the headline numbers.

All in all, the total number of people receiving some type of benefits is around 28 million, which would bring the real-time estimate of the unemployment rate north of 16.5%.

 

New and Pending Home Sales Beat Expectations

New Home Sales, which measures signed contracts on new homes, were up 14% in July, which was much stronger than the small gain that was expected. Sales are now up 36% when compared to July of last year. However, there were only 299,000 new homes for sale at the end of July, which represents a 4-month supply of homes, showing that inventory remains very tight.

The median sales price of new homes sold increased 7.2% when compared to July of last year to $330,600. It’s important to note that this is not appreciation but instead means half the homes sold above and half below this figure. In other words, more higher-priced homes sold when compared to the same time last year.

In addition, about 60% of the homes sold were above $300,000, which is a shift from June’s report where the majority were between $200,000 to $300,000. This is why we saw the median sales price rise so sharply.

The encouraging news is that affordability is still good thanks to low home loan rates and homes appreciating at a good clip, as evidenced by the FHFA and Case-Shiller reports detailed below.

Pending Home Sales, which measures signed contracts on existing homes in July, were up 5.9% from June to July and were also 15.5% higher than July of last year, per the National Association of REALTORS. NAR’s chief economist Lawrence Yun said, “If 20% more homes were on the market, we would have 20% more sales, because demand is that high.” Yun also noted that, “Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings.”

All in all, housing continues to be a bright spot in the economy in this unprecedented year.

 

The Latest Home Appreciation Figures

The latest Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed that nationally there was a 4.3% annual gain in June. This was unchanged from the gain reported for May.

The 20-city Index rose 3.5% year over year. While this was a tick down from the 3.6% annual figure reported for May, this is still a very strong appreciation figure. Regionally, price gains in Phoenix (+9%), Seattle (+6.5%) and Tampa (+5.9%) were the strongest, while price gains were smallest in Chicago, New York and San Francisco.

The Federal Housing Finance Agency (FHFA) also released their House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts. Home prices rose 0.9% in June and are up 5.7% compared to June of last year. This was a big improvement from the 4.9% annual appreciation reported for May.

 

Fed Sings a Different Inflation Tune

At the virtual Jackson Hole symposium, Fed Chair Jerome Powell stated that the Fed is willing to allow inflation to run hotter than normal to support the labor market and economy. He explained a policy of “average inflation targeting,” which means the Fed will allow inflation to run moderately above its 2% goal for some time following periods it has run below that objective. However, the Fed was very ambiguous because they did not mention the timeframe for calculating average inflation of 2%.

Why does this policy change matter?

Remember inflation erodes a Bond’s fixed rate of return. In other words, rising inflation can cause Bonds to worsen or lose value. This includes Mortgage Bonds, to which home loan rates are inversely tied. When Mortgage Bonds move lower, be it due to rising inflation or other reasons, home loan rates move higher.

The Fed’s favorite inflation measure, Personal Consumption Expenditures, was also released last week, showing that headline inflation increased 0.3% from June to July and 1% year over year.

Core PCE, which strips out food and energy prices and is what the Fed focuses on, also increased 0.3% from June to July and 1.3% compared to July of last year. This is still well below the Fed’s long-range target of 2%.

It will be interesting to see when the Fed starts the clock on the “average inflation” measure. If it were to start today, they would need to let inflation run to 2.7% to average 2%. The bottom line is that any increases in inflation will be important to monitor in the months ahead.

 

Home Hack of the Week

Getting organized at the start of the school year is always important. A great tool that can help is a family command center and creating one is easy thanks to these tips from Real Simple.

First, decide what you want to include. A calendar, corkboard to pin important items, a dry erase board, bins to organize key papers for each family member, hooks for spare car and house keys, bins or hooks for backpacks, and Mason jars to hold pens and pencils are great staples.

Next, choose a high traffic area like a wall in your mudroom, entryway or kitchen that everyone will see and feel compelled to keep tidy.

Your command center is also the perfect place to plan out your weekly meals and grocery list. You can also add your personal flair and make it fun and decorative. Inspiring quotes, favorite family photos or wall art can give the area visual appeal.

Finally, at the end of each week, purge all items that you no longer need so it’s easier to stay on top of the highest priorities for the following week.

What to Look for This Week

This week will be all about the labor sector, starting Wednesday with the ADP Employment Report, which will give us a read on private sector payrolls for August. Thursday brings the latest weekly Initial Jobless Claims while Friday we’ll see the highly anticipated Bureau of Labor Statistics Jobs Report for August, which includes non-farm payrolls and the unemployment rate.

 

Technical Picture

The Fed continues to stabilize the markets with its ongoing purchases of Mortgage Backed Securities. Mortgage Bonds have bounced off support at 102.766 and are back in a range between support at their 50-day Moving Average and overhead resistance at their 25-day Moving Average.

 

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 8-24-2020

By Todd Abelson NMLS #180858 on .

Week of August 17th, 2020 in Review

Initial Jobless Claims topped 1 million once again, as the week ending August 15 saw another 1.1 million people file for unemployment benefits for the first time. This was higher than the previous week’s first-time filers. While the number of people continuing to receive benefits did decrease, it remains just shy of 15 million people.

The housing sector continues to show signs of strength, as builder confidence in August matched a record high from 1998 per the National Association of Home Builders Housing Market Index. Housing Starts and Building Permits also rose sharply from June to July. The supply of home does remain low and is a challenge for buyers across the country, though this is supportive of home prices. The impact of the rising cost of lumber will also be something that’s important to monitor in the months ahead.

Sales of existing homes also came in hot, rising 25% in July per the National Association of REALTORS. This was the largest one month jump ever. The report also affirmed that inventory remains a challenge, with the number of homes for sale 21% lower than last July.

The manufacturing sector missed expectations in two key regions in August, however. In New York, the Empire State Index was reported at 3.7 versus expectations of 17 while the Philadelphia Fed Index was reported at 17.2 for August, which was also below expectations of 21.5

Lastly, the minutes from the Fed’s July 28-29 meeting were released, with an important note regarding yield curve controls as explained below.

 

Initial Jobless Claims Move Above 1 Million Again

Initial Jobless Claims moved higher in the latest week, as another 1.1 million people filed for unemployment benefits for the first time during the week ending August 15. This was 135,000 more than the previous week. California (+201K), Florida (+66K) and New York (+62K) reported the largest gains.

However, Continuing Claims improved by 636,000 to 14.8 million people continuing to receive benefits.

Pandemic Unemployment Assistance (PUA) Claims totaled 543,000 in the latest week. These claims are not captured in the headline figure and represent people like gig workers and contractors who usually would not be approved for unemployment benefits.

Continuing PUA Claims worsened by 500,000 to 11.2 million.

All in all, the total number of people receiving some type of benefits is around 28 million, which would bring the real-time estimate of the unemployment rate north of 17%.

 

Builder Confidence Ties Record High

Builder confidence has been on the rise in August, per the National Association of Home Builders Housing Market Index. This real-time read on builder confidence rose from 72 to 78 in August, matching the record high from 1998. Readings over 50 are considered positive.

All three components of the index were higher as well. Confidence in current sales conditions jumped 6 points to 84, sales expectations in the next six months was up by 3 points to 78, and buyer traffic rose 8 points to 65, which is also a record high.

NAHB’s chief economist, Robert Dietz, said, “Single family construction is benefiting from low interest rates and a noticeable suburban shift in housing demand to suburbs, exurbs and rural markets as renters and buyers seek out more affordable, lower density markets.”

One thing to keep an eye on is lumber prices, which have more than doubled since mid-April. These cost increases could lead to higher home prices in the fall and dampen some of the momentum in the housing sector.

 

Housing Starts Heat Up

Housing Starts were also on the rise in July, up 22.6% from June and coming in 23.4% higher when compared to last July. Though the gain was mostly in Multifamily Starts, Single-Family Starts were up a solid 8.2%.

Building Permits, a sign of future construction, were up 18.8% from June to July and up 9.4% when compared to July of last year. Almost the entire gain was comprised of permits for single family homes, which rose 17% from June to July.

Even with the increase in Housing Starts and Building Permits, supply remains extremely tight. And since builders were not putting up homes due to the pandemic, it may be challenging for them to keep up with the demand.

According to Freddie Mac, the housing market would need to add 1.6 million single family housing units per year to keep up with the demand. Add to this the price increase in building materials like lumber as mentioned above, it’s likely we are going to continue to see a big imbalance between supply and demand – and this will be supportive of home prices.

 

Existing Home Sales Also Soar

Existing Home Sales, which measures closings on existing homes, were up 25% in July per the National Association of REALTORS. Because these are closings, they likely represent buyers shopping for homes in May and June. This was the largest one month jump ever and comes off the heels of June’s strong report that showed sales were up 20%. First-time home buyers made up 35% of home sales, up from 34% in June.

 

Inventory remained tight, as there were only 1.5 million units for sale in July, which is down 21% compared to July of 2019. But even with this low level of inventory, sales are still up 9% year over year.

The median home price was reported at $304,100, up 8.5% versus the same time last year. Remember, this is not appreciation. Half the homes sold above and half below this number.

NAR’s chief economist, Lawrence Yun, noted, “The housing market is well past the recovery phase and is now booming with higher home sales compared to the pre-pandemic days. With the sizable shift in remote work, current homeowners are looking for larger homes and this will lead to a secondary level of demand even into 2021.”

 

Of Note From the Fed

The minutes from the Fed’s July 28-29 meeting were released and of particular note, the Fed said yield curve controls are offering only modest benefits. Many participants judged that yield caps and targets were not warranted in the current environment but should remain an option that the Federal Open Market Committee could reassess in the future if circumstances changed markedly.

The Bond market did not react well to this news upon its release because it was thought previously that the Fed was entertaining the idea of setting yield curve controls. This means the Fed would keep buying Mortgage Backed Securities (MBS) and Treasuries until they reached those target levels.

The bottom line is that the Fed is still buying MBS every day to the tune of $5 to $7 billion, which is helping to keep rates low. But they are not going to set targets on where yields should be.

 

Home Hack of the Week

Nobody wants to replace an appliance sooner than necessary. These simple maintenance tips from Real Simple can help you give your fridge a long shelf life.

You can help prevent cool air from seeping out by making sure seals are clean and free of food particles. Clean them quarterly using a toothbrush dipped in a solution of water and baking soda.

Keeping your fridge full helps keep the temperature low, as the food absorbs the warm air that comes in when the door is open. Be sure to set your fridge temperature from 37 to 40 degrees Fahrenheit and keep your freezer at 0 degrees or follow the manufacturer’s recommendation.

Place a level on top of your fridge to check that your fridge is even. An uneven fridge may not close properly, which could strain the motor and cause condensation.

Lastly, refreshing the ice regularly can both prevent ice buildup and keep ice from absorbing food odors. An open box of baking soda can also help keep your fridge smelling fresh.

 

What to Look for This Week

This week’s calendar is filled with news across many sectors of the economy. Tuesday brings more housing news, with July’s New Home Sales and the Case-Shiller Home Price Index for June. July’s Pending Home Sales follows on Thursday.

We’ll also get a read on how consumers are feeling this month, with the Consumer Confidence Index on Tuesday and the Consumer Sentiment Index on Friday.

Wednesday will bring news on July’s Durable Goods Orders while Thursday we’ll see the latest Initial Jobless Claims and the revised reading for second quarter GDP.

Ending the week on Friday, look for the Fed’s favored inflation measure, Personal Consumption Expenditures, along with Personal Income and Personal Spending for July.

 

Technical Picture

The Fed continues to stabilize the market with its ongoing purchases of Mortgage Backed Securities. Mortgage Bonds have been flirting with support at the 25-day Moving Average and if they do break beneath and remain below this level, the next floor of support is roughly 40bp lower.

 

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 8-17-2020

By Todd Abelson NMLS #180858 on .

Week of August 10th, 2020 in Review

Initial Jobless Claims were under 1 million for the first time since mid-March, as the week ending August 8 saw another 963,000 people file for unemployment benefits for the first time. The number of people continuing to receive benefits also decreased. While these improvements are certainly a step in the right direction, there could be a caveat to them as highlighted below.

Inflation grew hotter in July at both the consumer and wholesale levels. The Producer Price Index (PPI), which measures wholesale inflation, and the Consumer Price Index (CPI) both increased 0.6% from June to July – with PPI’s reading more than double what forecasters had predicted. The Core readings, which strip out volatile food and energy prices, also increased on both a monthly and annual basis. Despite the increases, inflation remains tame overall.

Retail Sales were also on the rise, up 1.2% from June to July. Removing automobiles, sales were up 1.9%. June’s sales figures were also revised a bit higher as well. Overall, the report was stronger than expected but it will be important to see how the reduced additional unemployment benefits impacts retail sales going forward.

The National Federation of Independent Business released its Small Business Optimism Index, which fell 1.8 points to 98.8 in July. Of note, reports of expected better business conditions in the next six months declined 14 points to a net 25%. NFIB’s Chief Economist Bill Dunkelberg said, “This summer has been challenging for many small business owners who are working hard to keep their doors open and remain in business.” He also added that, “Small business represents nearly half of the GDP and this month we saw a dip in optimism. There is still plenty of work to be done to get businesses back to pre-crisis numbers.”

Redfin released a survey showing that 56% of single-family homes for sale faced competition, followed by 54% of townhomes and 42% of condos. This reflects the tight inventory noted in recent New and Existing Home Sales reports.

Lastly, the Federal Housing Finance Agency made headlines, announcing a new fee. Find out more about what this means below.

Initial Jobless Claims Fall Below 1 Million

Another 963,000 people filed for unemployment benefits for the first time during the week ending August 8. This was 228,000 claims less than the previous week and the first reading under 1 million since mid-March. Continuing claims, which count people who continue to receive benefits, improved by 604,000 to 15.5 million. California (+213K), New York (+52K) and Texas (+51K) reported the largest gains.

First-time Pandemic Unemployment Assistance (PUA) Claims totaled 488,000 in the latest week. These claims are not captured in the headline figure and they represent people like gig workers and contractors who usually would not be approved for unemployment benefits. Continuing PUA Claims improved by 2.2 million to 10.7 million people continuing to receive benefits.

All in all, the total number of people receiving some type of benefits is around 28.2 million, which is an improvement of about 3 million. Note that this figure is delayed 3 weeks and given the improvement we’ve seen, the unemployment rate is likely
around 15% based on our calculations.

However, there is something important to keep in mind when looking at this data. While the improvement in jobless claims appears great on the surface, remember that the additional $600 in unemployment benefits expired recently. While we certainly hope that the decreasing number of unemployment claims is a result of people finding work, it is possible that some of the improvement is from people who are incented to return to work due to the expiration of additional benefits. We will certainly gain more clarity in the weeks to come.

Inflation Hotter Than Expected … But Still Tame
The Producer Price Index (PPI), which measures inflation at the wholesale level, increased 0.6% from June to July. This monthly increase was double what forecasters expected. On an annual basis, PPI increased from -0.8% to -0.4%. Core PPI, which strips out volatile food and energy prices, was up 0.5% in July and increased from 0.1% to 0.3% year over year.

July’s Consumer Price Index (CPI) came in at 0.6%, matching the increase seen in June. On an annual basis, consumer prices increased from 0.6% to 1%, which is a level that reflects inflation remaining in check. Higher gas prices certainly contributed to the monthly increase in consumer inflation, but they are still lower when compared to last year, weighing on the annual figure.

Core CPI, which also strips out food and energy prices, increased by 0.6% from June to July, while rising from 1.2% to 1.6% when compared to July of last year. Of note within the reports, rents have risen 3.1% across the country while the medical care index rose 5% over the last year.

The bottom line is that inflation remains well below the Federal Reserve’s 2% target, and the pandemic will likely keep it low in the immediate months ahead.

The Latest From the Federal Housing Finance Agency
The FHFA announced that they would be assessing a 0.5% fee on refinances for loans sold to Fannie Mae and Freddie Mac after September 1. Their stated reasoning was, “In light of market and economic uncertainty resulting in higher risk and costs incurred by Fannie Mae, we are implementing a new loan-level price adjustment.”

This is a fee that will ultimately impact consumers who are refinancing as noted above, though it will not impact purchase loans – at least for the time being.

Family Hack of the Week
There’s nothing worse than being in the middle of a recipe only to realize you’re missing an ingredient – especially if your kids are growing hungrier by the minute. If you ever find yourself in a pinch, a pinch of these easy substitutions can help.

If you’re missing allspice, mix cinnamon with a dash of nutmeg. If you need cinnamon, try nutmeg or allspice, but only 1/4 of the amount.

Basil, oregano and thyme can be interchanged with each other, while cilantro and parsley can also be swapped with great results.

You can make your own Italian seasoning by blending basil, oregano, rosemary and ground red pepper. And if you need 1 teaspoon of poultry seasoning, mix 3/4 teaspoon sage plus 1/4 teaspoon blend of thyme, savory, rosemary, black pepper and marjoram.

Save the day, and your meal, with these quick substitutions!

What to Look for This Week
Housing reports highlight this week’s busy economic calendar, starting on Monday with August’s National Association of Home Builders Housing Market Index, which gives us a real-time read on builder confidence. Tuesday brings Housing Starts and Building Permits for July, while Friday will give us an update on July’s Existing Home Sales.

There will also be an update from the manufacturing sector on Monday with August’s Empire State Index, which reflects manufacturing activity in the New York region. August’s Philadelphia Fed Index follows on Thursday.

The minutes from the Fed’s meeting in late July will be released on Wednesday.

And finally, the latest Initial Jobless Claims figures remain critical to monitor when they are released as usual on Thursday.

Technical Picture
The Fed’s ongoing purchases of Mortgage Backed Securities continues to stabilize the markets. After falling from recent highs, Mortgage Bonds are trading in a wide range between support at 102.765, which is the low from August 12, and overhead resistance at the 25-day Moving Average.

 

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 8-10-2020

By Todd Abelson NMLS #180858 on .

Week of August 3rd, 2020 in Review

Last week was all about the labor sector, as two key employment reports for July were released. In the private sector, job creations slowed significantly in July per the ADP Employment Report, with only 167,000 new jobs added last month. However, there was a bright spot with June’s figures revised sharply higher.

Meanwhile, the highly-anticipated Jobs Report from the Bureau of Labor Statistics (BLS) showed that there were 1.8 million job gains in July, which was better than expected. The report also showed that the unemployment rate improved. However, the headline numbers don’t tell the whole story, as detailed below.

The latest Initial Jobless Claims showed that another 1.2 million people filed for unemployment for the first time during the week ending August 1, which was the first decline we’ve seen in several weeks. Continuing claims also improved in the latest week, but the figures still remain astonishingly high.

CoreLogic’s latest Home Price Index Appreciation report showed that home prices rose 1.0% from May to June and 4.9% when compared to June of last year. The annual gain was also up from the 4.1% year-over-year appreciation reported in May’s report. Perhaps most significant is the improvement in the forecast for home prices in the year ahead, which is noted below.

And there was some positive news from the manufacturing sector, as the ISM Index, which measures the health of US manufacturing, came in at 54.2 for the month of July, which was above expectations of 53.5. While production remains below pre-pandemic levels, readings above 50 do indicate growth.

 

Digging Deeper into July Jobs Reports

Both the ADP and BLS Jobs Reports for July had some important details to note behind the headline figures. First in on Wednesday was the ADP Employment report, which showed a gain of only 167,000 jobs in the private sector. This was much lower than the 2 million new jobs that were expected. However, June’s report had a huge revision from 2.4 million to 4.3 million jobs created in that month.

The more-closely anticipated BLS report showed that there were 1.8 million job gains in July, which was stronger than the 1.5 million that was expected. There are two reports within the Jobs Report, and there is a fundamental difference between them. The Business Survey is where the headline job number comes from and it’s based predominately on modeling.

Week of August 3rd, 2020 in Review

Last week was all about the labor sector, as two key employment reports for July were released. In the private sector, job creations slowed significantly in July per the ADP Employment Report, with only 167,000 new jobs added last month. However, there was a bright spot with June’s figures revised sharply higher.

Meanwhile, the highly-anticipated Jobs Report from the Bureau of Labor Statistics (BLS) showed that there were 1.8 million job gains in July, which was better than expected. The report also showed that the unemployment rate improved. However, the headline numbers don’t tell the whole story, as detailed below.

The latest Initial Jobless Claims showed that another 1.2 million people filed for unemployment for the first time during the week ending August 1, which was the first decline we’ve seen in several weeks. Continuing claims also improved in the latest week, but the figures still remain astonishingly high.

CoreLogic’s latest Home Price Index Appreciation report showed that home prices rose 1.0% from May to June and 4.9% when compared to June of last year. The annual gain was also up from the 4.1% year-over-year appreciation reported in May’s report. Perhaps most significant is the improvement in the forecast for home prices in the year ahead, which is noted below.

And there was some positive news from the manufacturing sector, as the ISM Index, which measures the health of US manufacturing, came in at 54.2 for the month of July, which was above expectations of 53.5. While production remains below pre-pandemic levels, readings above 50 do indicate growth.

 

Digging Deeper into July Jobs Reports

Both the ADP and BLS Jobs Reports for July had some important details to note behind the headline figures. First in on Wednesday was the ADP Employment report, which showed a gain of only 167,000 jobs in the private sector. This was much lower than the 2 million new jobs that were expected. However, June’s report had a huge revision from 2.4 million to 4.3 million jobs created in that month.

The more-closely anticipated BLS report showed that there were 1.8 million job gains in July, which was stronger than the 1.5 million that was expected. There are two reports within the Jobs Report, and there is a fundamental difference between them. The Business Survey is where the headline job number comes from and it’s based predominately on modeling.

Continuing claims, which measure people who continue to receive benefits, also improved in the latest week by 844,000 to 16.1 million.

Pandemic Unemployment Assistance Claims (PUA), which are not captured in the headline figure, totaled 656,000 in the latest week. These claims are filed by people like gig workers and contractors who would not usually be approved for unemployment benefits. Continuing PUA Claims improved 70,000 to 13 million.

All in all, the total number of people receiving some type of benefit is likely over 30 million, which is still very high and would point to a much higher unemployment rate than what we are seeing reported, as noted above.

 

Promising Change to Forecast for Home Price Appreciation

Home prices rose 1.0% from May to June and 4.9% when compared to June of last year, per CoreLogic’s Home Price Index Appreciation report. The annual reading was up from May’s 4.1% annual increase. The states with the highest annual increases were Idaho (10.5%), Montana (9.8%), Missouri (8.5%) and Arizona (8.5%).

However, the big story was the forecast, as CoreLogic projects that home prices will increase 0.1% from June to July and they expect prices to fall 1.0% in the year going forward. Their annual forecast increased significantly from a negative 6.6% in the next 12 months.

CoreLogic noted that last month’s HPI Forecast of a 6.6% home price decline through May 2021 has been revised as projected unemployment rates through 2020 showed improvement. The recent rebound of home sales suggests the pandemic did not derail home buyers, who continue to be motivated by historically low mortgage rates. This, coupled with the declining supply of homes for sale, could shield home price growth from the impacts of the current economic uncertainty.

 

Family Hack of the Week

Staying hydrated is so important when the temperatures soar. Here’s a simple recipe to help you beat the heat and keep your family smiling and cool.

First, make a simple syrup by adding 1/4 cup water and 1/4 cup sugar to a saucepan over medium heat. Bring to a boil and simmer until the sugar is dissolved. Then remove from heat, add 1 tablespoon of fresh mint and steep for 15 minutes.

Next, chop up a honeydew and add it to a blender, along with 2 cups of cold water, 4 teaspoons of lime juice and 2 tablespoons of the simple syrup. Blend and then strain through a mesh sieve.

Serve over ice, garnish with fresh mint, and sit back, relax and enjoy!

 

What to Look for This Week

We’ll get an update on July inflation this week, first on Tuesday with the Producer Price Index, which measures wholesale inflation. The Consumer Price Index follows on Wednesday.

Tuesday also brings the latest news from the National Federation of Independent Business with their small business optimism index for July, while Friday will show us how retailers fared in July with the Retail Sales report.

Finally, the latest jobless claims figures remain important to monitor when they are released as usual on Thursday.

 

Technical Picture

The Fed continues to stabilize the markets with its ongoing purchases of Mortgage Backed Securities. Mortgage Bonds challenged overhead resistance at 103.688 but were pushed lower. Bonds are in a wide range with support almost 40bp beneath present levels.

 

Todd Abelson - Tucson Mortgages

 

Tucson Mortgages Home Loan News 8-3-2020

By Todd Abelson NMLS #180858 on .

Week of July 27th, 2020 in Review

Initial Jobless Claims rose for a second week in a row, as another 1.434 million people filed for unemployment benefits for the first time during the week ending July 25. This was about 12,000 claims higher than the previous week and reflects a pause in re-opening in some states and the exhaustion of Paycheck Protection Program (PPP) funds. Continuing claims, which measure people who continue to receive benefits, also increased.

The much-anticipated advanced or first look at second quarter GDP was reported at -32.9%. Though this was a little better than the -34.7% expected, it was the worst reading on record. Based on this decline, we will need to see a 50% gain in GDP to get back to where the economy was before the pandemic began.

There was some good news from the manufacturing sector as the Chicago PMI (which measures the health of manufacturing activity in that region) came in better than expected at 51.9. Readings above 50 indicate expansion while readings below 50 indicate contraction.

The housing sector delivered some positive news as well, with Pending Homes Sales up 16.6% in June after rising 44.3% in May. The report reflects signed contracts on existing homes in June, and a 16.6% gain speaks well for future existing sales. There was also an update from Case-Shiller on home appreciation, as detailed below.

The Fed’s favored measure of inflation, Personal Consumption Expenditures (PCE), showed that headline inflation increased 0.4% from May to June while also rising from 0.5% to 0.8% year over year. Core PCE, which strips out volatile food and energy prices, increased 0.2% in June while decreasing from 1.0% to 0.9% annually.

Core PCE is most important to the Fed and it is well below the Fed’s target of 2%. This does give the Fed cover to continue its asset purchases without the fear of inflation. More on last week’s Fed meeting and its statement regarding these purchases below. Also of note within the report, Personal Incomes fell 1.1% in June, while Personal Spending rose by 5.6%, marking a second straight month of increases.

 

Initial Jobless Claims Rise in the Latest Week

Another 1.434 million people filed for unemployment benefits for the first time during the week ending July 25, about 12,000 more than the previous week. This marked the second consecutive week of higher figures and reflects some states reclosing portions of their economy and the exhaustion of PPP funds. California (+249K), Florida (+87K) and New York (+85K) reported the largest gains.

Continuing claims, which measure people who continue to receive benefits, also increased from 16.79 million to 17.018 million.

In addition to the headline jobless claims figure, 830,000 Pandemic Unemployment Assistance (PUA) Claims were also filed in the latest week. PUA Claims represent people like gig workers and contractors who would not usually be approved for unemployment benefits. Continuing PUA Claims did improve slightly from 13.18 million to 12.4 million but are still extremely high.

All in all, the total amount of people receiving some type of benefits improved slightly from 31.8 million to 30.2 million. If we divide this total into the labor force of 160 million, there is likely a 19% unemployment rate. 

 

Two Updates from the Housing Sector

The latest Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed that home prices nationwide rose 4.5% on an annual basis in May. This was a drop from the 4.6% year-over-year reading in April.

The 20-city Index decreased from 3.9% in April to 3.7% in May but considering the adversity that the housing market has faced due to the pandemic, these are still very strong appreciation figures. Part of the reason for the strong gains is a lack of supply, as the Existing Home Sales report for June showed that inventory is down 18% when compared to the same time a year ago.

Regionally, price gains in Phoenix, Seattle and Tampa continued to be the strongest in the nation. Phoenix posted a 9% year-over-year price increase, followed by Seattle with a 6.8% increase and Tampa with a 6.0% increase. Price gains were smallest in Chicago, New York and San Francisco.

On the sales front, Pending Home Sales were up 16.6% in June after rising 44.3% in May, which was just above the expected 15% gain. On an annual basis, sales were up 6.3% when compared to June of last year, after being down 5.1% annually in May.

The Pending Home Sales report is an important one because it reflects how many signed contracts on existing homes there were in June. The 16.6% gain speaks well for future existing sales.

 

Fed Willing to Do Whatever It Takes

The Fed held their regularly scheduled Federal Open Market Committee meeting last week and of note, Fed Chair Jerome Powell said that the Fed would be willing to do whatever it takes to foster maximum employment in efforts to return to pre-pandemic levels.

Powell said the Fed will continue to buy assets, including Mortgage Backed Securities, at least at the current pace. The Fed also said they would be willing to do more if they thought it would help.

This is significant because the Fed’s current purchases have been a stabilizing force in the markets. The Bond market took the Fed’s remarks as a positive sign that the Fed is going to be buying Mortgage Bonds for a long time.

 

Family Hack of the Week

Pets love to be outside during the summer months but when temperatures rise, our four-legged friends can heat up quickly. It’s important to be aware of signs of overheating in your pets, which include excessive panting, increased heart rate, drooling, weakness, glazed eyes, vomiting or even unconsciousness.

If you’re ever concerned your pet is suffering from heat exhaustion, the Humane Society suggests following these do’s and don’ts.

If you’re away from home, move your pet into the shade so she can begin to cool off. If you’re at home, bring your pet inside, sit her in front of a fan and place a cool washcloth on her belly, ears, paws and neck. It’s important not to use cold water or a cold bath to help cool her off, as this could cause shock. Call your vet and ask for further advice on what to do next.

These safety tips will help your pets enjoy the summer sun safely!

 

What to Look for This Week

Monday brings news from the manufacturing sector, with the ISM Index reading for July. Then news on employment will dominate the headlines. The ADP employment report for July releases first on Wednesday. The latest Initial Jobless Claims will be reported as usual on Thursday, and we’ll be watching closely to see if claims rise for a third straight week. Friday brings the much-anticipated Bureau of Labor Statistics Jobs Report for July, which includes non-farm payrolls and the unemployment rate.

 

Technical Picture

The Fed continues to stabilize the markets with its ongoing purchases of Mortgage Backed Securities. Mortgage Bonds busted through resistance at 103.219 and broke above the next ceiling at 103.469 as well. Bonds are trading just below the next level of resistance at 103.70, which is the top of the recent rising trend line, so we must be on guard for a pullback from these high levels. Also keep in mind that Bonds are in overbought territory, so if there is a pullback it could be exacerbated. Yields on the 10-year broke beneath 0.54% and are now trading at 0.53%, which is another positive.

 

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 7-27-2020

By Todd Abelson NMLS #180858 on .

Week of July 20th, 2020 in Review

The economic calendar was relatively quiet, with unemployment numbers and housing reports dominating the headlines.

The news regarding jobless claims continues to reflect the pandemic’s ongoing impact on the labor sector, as another 1.416 million people filed for unemployment benefits for the first time during the week ending July 18. This was about 100,000 claims higher than last week’s number of 1.3 million first-time filers. Continuing claims, which measure people continuing to receive benefits, did improve significantly – at least, the headline figure did. There’s more to the story, as noted below.

A plethora of housing reports were also released, with June’s Existing Home Sales surging 20.7% from May, marking the largest one-month increase ever. Inventory of existing homes continues to remain a challenge for buyers, however, down 18.2% compared to June of last year. New Home Sales also rose much higher than expected in June, up 13.8% from May.

Lastly, the Federal Housing Finance Agency (FHFA) released their House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts. While home prices fell 0.3% from April to May, they are still up 4.9% compared to May of last year.

 

Initial Jobless Claims Rise in Latest Week

Another 1.416 million people filed for unemployment benefits for the first time during the week ending July 18, an increase of about 100,000 people from the previous week’s number of 1.3 million. California (+292K), Florida (+105K) and Georgia (+120K) saw the largest gains.

Continuing claims improved significantly from 17.304 million to 16.197 million, but there is much more to this headline number because the Pandemic Unemployment Assistance (PUA) Claims are not captured.

PUA Claims reflect people like gig workers and contractors who usually would not be approved for unemployment benefits. These claims, again which are separate and in addition to the headline claims, totaled 975,000 in the latest week. Continuing PUA Claims did improve slightly from 14.2 million to 13.18 million but they are still significant.

All told, the total number of people receiving some type of benefits improved slightly from 32 million to 31.8 million. Based on the total number of people receiving benefits, divided into the labor force of 160 million, there is likely a 20% unemployment rate.

 

Home Sales Surge in June

The National Association of REALTORS (NAR) reported that sales of existing homes jumped 20.7% in June, which was the largest one-month jump ever, albeit still slightly beneath expectations. The report measures closings in the month of June and likely represents buyers shopping for homes in April and May.

Sales were down 11.3% year over year, but this is a big improvement from the -27% annual reading we saw in May’s report. First-time home buyers made up 35% of home sales, up from 34%.

Inventory remains tight, as there were only 1.57 million units for sale, down 18.2% when compared to June of last year. The median home price was reported at $295,300, up 3.5% year over year.

“The sales recovery is strong, as buyers were eager to purchase homes and properties that they had been eyeing during the shutdown,” said Lawrence Yun, NAR’s chief economist. “This revitalization looks to be sustainable for many months ahead as long as mortgage rates remain low and job gains continue.”

Meanwhile, New Home Sales, which measure signed contracts on new homes, also came in strong, up 13.8% from May to June. This was much stronger than the 4% gain anticipated. Sales are now up 7% when compared to June of last year, which is quite an impressive amount especially given the pandemic.

The median new home price increased 5.8% year over year to $329,300, while the majority of homes that sold were between $200,000 and $300,000.

An Update on Home Appreciation

There was news on home appreciation from the Federal Housing Finance Agency House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts.

Home prices fell 0.3% from April to May, but they are still up 4.9% compared to May of last year. However, May’s 4.9% year-over-year reading is a bit lower than the reported 5.5% annual gain in April and 5.9% in March.

 

 

 

 

 

Family Hack of the Week

Looking for some new ways to keep your kids entertained throughout the remaining hazy days of summer? Here are two outdoor craft ideas that are sure to be a hit.

 

Everyone loves tie-dye, and now you can up the ante beyond t-shirts and sweatshirts by tie-dyeing old beach towels or a blanket. Once they’ve dried, extend the fun by planning a picnic outing where you can put them to good use.

 

Pool noodles are for more than swimming pools – they can double as paint brushes. First, lay easel paper flat, placing rocks along the edges and corners so the paper doesn’t blow away or move. Next, add washable paint to large bowls. Your kids can then dip the ends of the pool noodles into the paint and start creating their masterpieces.

 

Enjoy the warm weather with these fun and creative outdoor crafts!

 

What to Look for This Week

The last week of July brings a full slate of economic data, beginning Monday with Durable Goods Orders for June. We’ll get a sense of how consumers are feeling with July’s Consumer Confidence reading on Tuesday, plus there’s housing news with May’s Case-Shiller Home Price Index. June’s Pending Home Sales figures follow on Wednesday.

Wednesday also brings the statement from the latest Federal Open Market Committee meeting, which always has the potential to move the markets.

On Thursday, all eyes will be watching for the latest Initial Jobless Claims numbers, along with the first look at Gross Domestic Product for the second quarter. The market is expecting -35% GDP in the second quarter, following -5% in the first quarter.

Finally, on Friday we’ll get an update on the Fed’s favorite inflation reading with June’s Personal Consumption Expenditures. Also look for June’s Personal Income and Personal Spending figures along with July’s Consumer Sentiment Index and Chicago PMI (which measures manufacturing in that region).

We’ll also keep an eye on rising tensions between the U.S. and China, as well as details regarding a new stimulus package throughout the week.

 

Technical Picture

The Fed’s ongoing purchases of Mortgage Backed Securities remain a stabilizing force in the markets, though they did cut back their purchases last week from $4.4 billion to $3.4 billion per day. Mortgage Bonds have been trading sideways over the past two weeks, testing overhead resistance a few times but failing to break through. Every time the 103.219 ceiling was tested, or close to being tested, Bonds have been pushed lower. Mortgage Bonds remain in the middle of a wide range between the aforementioned ceiling and support at the 25-day Moving Average, meaning they are susceptible to price swings.

 

Tucson Mortgages Home Loan News 7-20-2020

By Todd Abelson NMLS #180858 on .

Week of July 13th, 2020 in Review

The pandemic’s impact on unemployment continues, as another 1.3 million people filed for unemployment benefits for the first time during the week ending July 11. While continuing claims did improve significantly from the previous week, the headline numbers may not be telling the whole story, as highlighted below.

Over in the housing sector, confidence among builders was on the rise in July, per the National Association of Home Builders Housing Market Index, which increased 14 points to 72. Housing Starts and Building Permits also improved from May to June, with significant increases in both for single family homes.

June’s Consumer Price Index showed that consumer inflation rose after three previous months of declines, but the overall trend is that inflation remains tame. Meanwhile, Retail Sales came in stronger than expected last month while May’s figure was also revised higher.

There was also some good news from the manufacturing sector, as July’s Empire State Index showed that manufacturing activity in the New York region rose from essentially flat to 17.2. This is a big improvement from the -48 reading just two months ago. Meanwhile, the Philadelphia Fed Index showed a modest slowdown for manufacturing in that region in July, after a large expansion in June. However, July’s reading was higher than expected.

Lastly, there was also some positive news from the National Federation of Independent Business, as their small business optimism index for June increased to the best level since February. The NFIB chief economist, Bill Dunkelberg, said “Small businesses are navigating the various federal and state policies in order to reopen their business and they are doing their best to adjust their business decisions accordingly. We’re starting to see positive signs of increased consumer spending, but there is still much work to be done to get back to pre-crisis levels.”

 

Digger Deeper Into Unemployment Figures

Another 1.3 million people filed for unemployment benefits for the first time during the week ending July 11, coming in slightly higher than expectations of 1.288 million new claims. Pennsylvania (+209K), California (+127K) and Illinois (+57K) reported the largest gains. Continuing claims, which measure people continuing to receive benefits, improved significantly from 18.06 million to 17.338 million.

But … are things really improving?

There are also PUA or Pandemic Unemployment Assistance Claims that are not captured in the headline figure, and those totaled 928,000 in the latest week. Continuing PUA Claims are now above 15 million, which is significant!

This makes the total number of people receiving some type of benefit around 32 million, meaning it’s possible that the unemployment rate is really over 20%. Because of this, unfortunately, it doesn’t appear that the situation is improving in any meaningful way when we look at the amount of people who are receiving benefits.

 

Home Builders Feeling Optimistic

The NAHB Housing Market Index, which is a real time gauge of builder confidence, increased 14 points, rising from 58 in June to 72 in July. All three components of the index increased, with current sales rising 16 points to 79 and sales expectations up 7 points to 75. It was especially encouraging to see buyer traffic jump 15 points to 58, moving from contraction territory (below 50) to expansion (above 50).

Housing Starts, which measure the start of construction on new homes, rose 17.3% in June. This was in line with estimates and a nice move higher. Housing Starts are now down only 4% on an annual basis, which is significantly improved from down 23% in the previous report. The gain was pretty much all in starts on single-family homes, which were up 17.2%.

Building Permits also saw an improvement from May to June, up 2.1%, though they are down 2.5% when compared to June of last year. Permits for single family homes also saw a big jump in June, up 11.8% from May.

 

The Latest on Consumer Inflation and Retail Sales

The Consumer Price Index (CPI), which measures inflation on the consumer level, came in at 0.6% in the month of June. While this increase ended three months of declines, the overall trend is that inflation remains tame. Of note, gasoline prices rose 12.3% in June, which was a big reason for the overall gain in inflation. The year-over-year reading increased from 0.1% to 0.6%.

Core CPI, which strips out food and energy prices, increased by 0.2% from May to June, while the annual reading remained stable at 1.2%. Within the reports, rents are rising 3.2% across the US, which is down from 3.5%.

There was some good news for retailers as sales increased by 7.5% in June, better than the expected 5.2% gain, while May’s sales figure was revised higher by 0.5% to 18.2%. Sales at clothing and accessory stores shut up a whopping 105.1% in June, while sales at electronics and appliance stores, and furniture and home furnishing stores also saw nice gains.

 

Family Hack of the Week

Summer is prime time for picnics! These simple tips are the perfect set up for a relaxing day with loved ones.

Keep your food and drinks cooler longer by filling plastic storage bags with water and freezing them the night before. The large chunks of ice will last longer than smaller cubes.

Keep it simple by bringing things that aren’t too heavy to carry, especially if your perfect picnic spot involves a hike or long walk to get there. Also, plan your menu well so you won’t have a lot left to carry back with you. Don’t forget the trash bags.

Save yourself an unexpected hike back to the car by placing things like napkins, cutlery, hand sanitizer and bug spray in selable plastic bags and taping them to the inside top of your cooler.

Last, don’t let ants ruin the party. Put a plastic container under each picnic table leg and fill with water to help prevent them from crawling up the table.

 

What to Look for This Week

The second half of the week heats up with key housing reports. First up, the Federal Housing Finance Agency’s House Price Index for May and June’s Existing Home Sales will be released on Wednesday, followed by June’s New Home Sales on Friday. And as usual, weekly Initial and Continuing Jobless Claims will be important to monitor when the latest figures are reported on Thursday.

 

Technical Picture

The Fed’s ongoing purchases of Mortgage Backed Securities remain a stabilizing force in the markets. Mortgage Bonds continue to trade in the middle of the range between support at the 25-day Moving Average and overhead resistance at 103.219. This is a wide range, which means there can be significant price fluctuations as we have seen over the past week. However, there is also a rising trend line that Bonds are attempting to remain above, which should provide some near support.

 

Tucson Mortgages Home Loan News 7-13-2020

By Todd Abelson NMLS #180858 on .

Week of July 6th, 2020 in Review

After some big labor market reports were released on July 2 and the fireworks of July 4, last week was relatively quiet on the economic report front.

Weekly initial jobless claims were once again released on Thursday, and though they beat expectations, they remain in the millions. Another 1.314 million people filed for unemployment benefits for the first time during the week ending July 4. A positive sign in the report is that continuing claims, which measure people continuing to receive benefits, did improve pretty significantly after being persistent for many weeks.

CoreLogic also released home appreciation figures for May, showing that prices rose 0.7% from April to May and 4.8% when compared to May of last year. However, CoreLogic has revised their annual forecast for the year moving forward, as detailed below.

Lastly, inflation continues to remain tame. At the wholesale level, the Producer Price Index was down 0.2% in June after rebounding in May, coming in much lower than expectations. The lack of wholesale inflation will certainly not lead to consumer inflation – and it’s one of the reasons Mortgage Bonds have moved higher and home loan rates have moved lower of late.

 

Initial Jobless Claims Beat Expectations

The latest weekly initial jobless claims showed that another 1.314 million people filed for unemployment benefits for the first time during the week ending July 4. This was slightly better than expectations of 1.4 million claims. California (+267K), Texas (+117K) and Georgia (+103K) reported the largest gains.

Continuing claims finally saw a big improvement, falling from 18.76 million to 18.06 million, which is the first meaningful improvement we have seen since in quite some time.

If we factor in the amount of new and continuing claims and the number of people in the labor force, we estimate that the real-time unemployment rate is around 14%. This rate would be about 3% higher, or 17%, without the estimated number of temporary new jobs created by the Paycheck Protection Program.

 

The Latest Home Appreciation Forecasts

CoreLogic’s Home Price Index Appreciation report for May showed that home prices rose 0.7% from April to May. Home prices were also up 4.8% when compared to May of last year. This is a decline from the year-over-year reading of 5.4% appreciation in April’s report. Washington (5.0%), San Diego (4.9%) and Las Vegas (4.8%) led the gains.

CoreLogic forecasts that home prices will drop 0.1% from May to June, and they expect prices to fall 6.6% from May 2020 to May 2021. Their annual forecast dropped significantly from their previous prediction of a 1.3% decline.

Dr. Frank Nothaft, Chief Economist for CoreLogic, said, “Pending sales and home-purchase loan applications are higher than in June of last year and reflect the buying activity of millennials. By the end of summer, buying will slacken and we expect home prices will show declines in metro areas that have been especially hard hit by the recession.”

CoreLogic also noted that a lot of the demand was pent up from spring to summer with elevated unemployment, and that purchase activity and home prices could fall off once summer ends.

It remains to be seen if this latest forecast will prove true, or if the surge in sales and appreciation levels off less steeply, which could still allow for home price gains over the next year.

 

Wholesale Inflation Lower Than Expected

The Producer Price Index, which measures inflation on the wholesale level, was down 0.2% in June after rebounding in May. The reading was much lower than expectations of a 0.4% rise. PPI also declined 0.8% on an annual basis, which was unchanged from May’s annual reading.

The core rate, which strips out volatile food and energy prices, was down 0.3% from May to June, which was also much lower than expectations of a 0.2% gain. Year over year, core PPI was up 0.1%.

The bottom line is that the ongoing pandemic continues to depress demand. There is no wholesale inflation, which will certainly not result in consumer inflation. This is one of the reasons we have seen Mortgage Bonds on such a nice move higher.

Remember, inflation reduces the value of fixed investments like Mortgage Bonds. And since home loan rates are tied to Mortgage Bonds, when Bonds improve, home loan rates can as well.

 

Family Hack of the Week

July is National Ice Cream month. Making homemade ice cream is an activity that’s fun for the whole family, and it’s easy to do even if you don’t have an ice cream maker. Just follow these simple steps from our friends at Taste of Home.

First, freeze any freezer-safe shallow pan or bowl. A 13×9 inch Pyrex pan or stainless steel pan are great options. Then mix 2 cups heavy whipping cream, 2 cups half-and-half, 1 cup sugar and 2 teaspoons of pure vanilla extract, making sure the sugar is well dissolved.

Next, add your mixture to the cold pan and freeze it for about 20 to 30 minutes. Once the edges start to freeze, take out the mixture and beat it using a hand mixer to keep the ice cream smooth. Repeat this process several times until the ice cream is firmly frozen.

For an added bonus, mix in chocolate chips, candy chunks or drizzles of melted chocolate before freezing the ice cream. Or have a family sundae night and serve with everyone’s favorite toppings.

 

What to Look for This Week

There’s a full slate of economic reports ahead this week across a wide range of sectors. Tuesday brings the National Federation of Independent Business Small Business Optimism Index for June and more inflation news, this time on the consumer front with June’s Consumer Price Index.

There will be an update from the manufacturing sector with July’s Empire State Index (which focuses on the New York region) on Wednesday, followed by July’s Philadelphia Fed Index on Thursday.

Thursday also brings the latest weekly jobless claims numbers, an update on Retail Sales for June and the National Association of Home Builders Housing Market Index for July, which will give us a real-time read on builder confidence.

More housing news ends the week on Friday, with June’s Housing Starts and Building Permits report. Plus, we’ll get the latest read on how consumers are feeling with July’s Consumer Sentiment Index.

 

Technical Picture

The Fed continues to stabilize the markets with its ongoing purchases of Mortgage Backed Securities.  Mortgage Bonds rallied more than 70bp since July 1st, but are now backing off a strong ceiling of resistance at 104.625.

 

Tucson Mortgages Home Loan News 7-6-2020

By Todd Abelson NMLS #180858 on .

Week of June 29th, 2020 in Review

The July 4 holiday provided plenty of fireworks around the country, as did last week’s busy economic calendar. All eyes were on the labor sector, as three key reports were released.

First up, the ADP Employment Report showed 2.37 million job gains in the private sector during the month of June. Though this was lower than anticipated, May’s report was revised to the positive, moving from a net job loss to job gains. The more-closely watched Bureau of Labor Statistics report showed 4.8 million job gains in June, beating expectations of 2.9 million job creations. The Unemployment Rate decreased from 13.3% to 11.1%, though this figure would have been 12.1% without the classification error noted below.

The latest weekly Initial Jobless Claims showed that another 1.427 million people filed for benefits for the first time during the week ending June 27. While this was in line with expectations, it’s still a startling number to digest.

Housing was in the news as well, as May’s Pending Home Sales saw a huge rebound while home prices continued to appreciate in April per the Case Shiller Home Price Index.

Also of note, the ISM Index, which measures the health of the manufacturing sector in the US, came in at 52.6 for the month of June, which was above expectations of 49.0. However, manufacturing in the Chicago region saw just a slight rebound in June, per the Chicago PMI, after hitting a 38-year low in May.

Lastly, the minutes from the Fed’s meeting on June 9-10 were released and they showed discussion around Forward Guidance, Asset Purchases, and Yield Curve Control. Participants voiced concern over the prospect of Yield Curve Control and adoption seems unlikely at this time. Fed officials also noted that the fiscal help provided by Congress ‘might prove to be insufficient.’

 

June’s Employment Reports Show Job Gains

Both the ADP and BLS employment reports showed job gains in June. First in on Wednesday was the ADP Employment Report, which revealed that there was a gain of 2.37 million jobs in the private sector. While this was less than the expected 3 million job gains for June, May’s figure was revised higher from 2.76 million job losses to 3.065 million job gains.

Hospitality industry workers saw the biggest gain, with 961,000 hires, which makes sense as more states began re-opening. Small businesses overall also added 937,000 jobs.

The more-closely anticipated Bureau of Labor Statistics report came out on Thursday, a day earlier than usual due to the market closures on Friday, and it showed that there were 4.8 million job gains in June. This was much stronger than the 2.9 million expected.

There are two reports within the Jobs Report, and there is a fundamental difference between them. The Business Survey is where the headline job number comes from and it’s based predominately on modeling.

The Household Survey, where the Unemployment Rate comes from, is done by actual phone calls to 60,000 homes. It also has a job loss or creation component, meaning it may be more reflective of actual job numbers – and it came in slightly higher than the headline number, showing 4.94 million job gains.

The Unemployment Rate decreased from 13.3% to 11.1%, which was stronger than expectations of 12.3%. What explains the decrease? While there were 4.94 million job gains, 1.7 million people entered the labor force, which is why we saw the unemployment rate decrease.

It’s important to note that there has been a misclassification error where people were classified as absent from work for other reasons and not marked as unemployed on temporary layoff when they should have been. Without this error, the unemployment rate would have been 1% higher or 12.1%.

The all in U6 Unemployment Rate, which includes total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, decreased from 21.2% to 18%.

Average hourly earnings decreased from 6.7% to 5%, while average weekly earnings decreased from 7.7% to 5.3%. Part of the reason for the weekly decrease was a decline in hours worked of .2.

 

Initial Jobless Claims Remain High

Another 1.427 million people filed for unemployment benefits for the first time during the week ending June 27. While this figure was in line with expectations, it is still staggering to think about. California (+279K), Georgia (+115K) and Texas (+96K) reported the largest gains.

Continuing claims, which measure people continuing to receive benefits, have been persistent and were little changed at 19.29 million.

When we factor in the amount of new and continuing claims and the number of people in the labor force, we estimate that the real-time unemployment rate is around 15%. And when we try to estimate how many new jobs the Paycheck Protection Program has temporarily created, we think that the unemployment rate could be about 3% higher or closer to 18% without it. This figure correlates more closely with the all in U6 number as noted above.

 

Pending Home Sales Sets Record 

Pending Home Sales, which measures signed contracts on existing homes, bounced back strongly in May, rising 44.3%. This was the highest month-over-month gain on record. But, before we start celebrating, keep in mind that April’s reading fell by 22% and March saw a decline of 21%.

In addition, for perspective, the index level of 99.6 compares with 111.4 in February and 108.9 in January. So, although recovery is underway, sales are still down 5.1% year over year.

The National Association of REALTORS’ chief economist, Lawrence Yun, said, “This has been a spectacular recovery for contract signings, and goes to show the resiliency of American consumers and their evergreen desire for homeownership.” He also noted that, “This bounce back also speaks to how the housing sector could lead the way for a broader economic recovery.”

 

A Quick Note Regarding Home Appreciation

The Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, was released for April. Of its various indexes, two are especially important to note.

First, the National Index, which covers all nine U.S. Census divisions, reported a 4.7% annual gain in April, which was an increase from 4.6% in March. Meanwhile, the 20-city Index increased from 3.9% in March to 4% in April on a year-over-year basis. Phoenix, Seattle and Minneapolis reported the highest year-over-year gains.

 

Family Hack of the Week

Barbecue season is in full swing, but your grill can do far more than perfect your favorite proteins. These easy tips for grilling fruit from the folks at Spruce Eats make for a healthy and delicious summertime dessert.

Plums are delicious over the grill, as the cut sides will caramelize thanks to the fruit’s natural sugars. After cleaning and oiling your grill’s cooking grate, heat it to medium high. Rinse and dry plums, and then cut them in half and remove the pits. Next, place the plums on a baking tray and brush with oil or melted butter. Once your grill is hot, place plums cut-side down, cover and cook for about 5 minutes until heated-through.

And if you prefer peaches or nectarines, they’re equally delightful on the grill. Simply follow the above steps. You can also brush these with honey as you’re grilling them.

Lastly, don’t forget to serve with a sprinkle of cinnamon and a generous scoop of your favorite vanilla ice cream.

 

What to Look for This Week

After the fireworks from last week, this week’s calendar is relatively quiet. The main highlight will be the latest weekly jobless claims figures when they’re reported on Thursday. We’ll also get a read on wholesale inflation for June via the Producer Price Index on Friday. And there will be a 10-year and 30-year Treasury Auction that could impact the markets, depending on participation.

 

Technical Picture

The Fed’s ongoing purchases of Mortgage Backed Securities continue to add stability to the markets. Mortgage Bonds are trading in a range between support at the 25-day Moving Average and overhead resistance at 104.281. Bonds did test this resistance level last Tuesday but were pushed lower. However, they held their own in the face of the strong Jobs report from the BLS on Thursday and did not react negatively.